Pound Soars As Conservatives Secure Parliament Majority

Pound Soars As Conservatives Secure Parliament Majority


The British pound soared against peers as the Conservatives party secured the largest majority of seats in the UK Parliament since 1987. Until now, the conservative gained 364 of 650 seats. Boris Johnson stated that the United Kingdom would leave the European Union on the 31st of January of 2020. Even though the election results could remove the Brexit deadlock, which weighed on the UK markets for a while, but more obstacles could come across while negotiating the new relationship terms with the EU states during the transition period. The GBPUSD rose to 1.3515, the highest since May 2018, and the EURGBP dropped to 0.8275, the lowest since July 2016.


The Euro was firmer against rivals on upbeat comments from the new ECB president Christine Lagarde. The European Central Bank concluded its monetary policy meeting by leaving interest rates unchanged. In her presser, Lagarde declared that the downside risks to the economy became somewhat less pronounced, and she expects inflation to rise in the coming months. The EURUSD rallied to a four-month high of $1.1200, and the EURJPY edged higher to 122.58.


Major US stock-index futures climbed to a fresh record high on renewed trade deal hopes. Trump tweeted that the US and China are very close to reaching a big trade deal. CNBC reported that US negotiators are offering to cancel new China tariffs and reduce existing levies on Chinese goods by up to 50% on $360 billion worth of imports, aiming at striking a deal ahead of December 15 tariffs deadline. The Dow Jones Industrial Average futures raced higher to 28278, the S&P500 futures advanced to 3168, and Nasdaq futures soared to 8544.


The dollar index, which measures the greenback against a basket of major currencies, plunged to 96.59, the lowest since late June, as market participants favored European currencies. The conservative's parliamentary majority and upbeat comments from ECB's Lagarde boosted the demand for pound and Euro. On the other hand, the fresh trade hopes enhanced investors' risk appetite towards riskier assets. The US 10-year yields rose to a one-month high of 1.918%, and the USDJPY inched higher to 109.66.


Gold prices plunged sharply post Trump's tweet over trade. The latter declared that China and the United States are very close to reaching a big deal. The precious metal benefited from the trade disputes that started in February 2018. The price of a gold ounce dropped to $1462 after trading at a one-month high of $1486, and currently hovering above $1470. The price of a silver ounce is trading near $17 handle, while palladium extended gains to a fresh record high of $1984.


Oil prices traded in a tight range near a three-month high awaiting clarity over trade negotiations between China and the United States. The recent comments were not enough to drive oil benchmarks to higher prices. The West Texas Intermediate crude futures rose to $59.69, and Brent futures surged to $64.83.

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